Currency in Turkey: Understanding the Turkish Lira in 2020

In 2020, Turkey's economy was undergoing significant changes, with its currency, the Turkish lira (TRY), at the center of attention. The Turkish lira is the official currency of Turkey and the Turkish Republic of Northern Cyprus, and it is represented by the symbol ₺. Its ISO code is TRY. But in 2020, the lira faced some of its most challenging times in recent history.

The Lira's Journey: From Stability to Crisis

Turkey's currency has a long and storied past, evolving from the Ottoman lira, first introduced in 1844. After the establishment of the Republic of Turkey in 1923, the lira became the nation’s currency. The 21st century, however, brought a new series of economic hurdles that deeply impacted the lira's value, culminating in a significant depreciation by 2020.

The Depreciation Spiral: A Cautionary Tale

By the year 2020, the lira had lost approximately 30% of its value against the US dollar. This dramatic depreciation was fueled by a mix of domestic challenges and global financial volatility. High inflation rates, coupled with Turkey’s rising debt and political instability, exacerbated the situation. The Turkish government’s unconventional monetary policies, including lowering interest rates to combat inflation, contributed to the lira’s spiraling value.

The currency’s value against major international currencies plummeted throughout 2020. As global investors began to lose confidence, the Turkish central bank attempted to intervene by using foreign currency reserves to stabilize the lira, but these efforts proved insufficient.

Year	Turkish Lira to USD Exchange Rate
2018	4.82 TRY = 1 USD
2019	5.95 TRY = 1 USD
2020	7.43 TRY = 1 USD

The table above highlights the growing gap between the Turkish lira and the US dollar over three years. By the end of 2020, the lira had become one of the worst-performing emerging-market currencies.

The Impact on Everyday Life

For Turkish citizens, the lira's depreciation meant skyrocketing prices for imported goods, fuel, and even basic food items. Inflation soared to over 12%, severely affecting the purchasing power of the average consumer. Imported products, particularly those priced in US dollars or euros, became far more expensive, and many Turkish businesses struggled to keep prices low while managing increased costs.

One of the sectors hit hardest by the lira's downfall was the housing market. Property values in Turkey, particularly in cities like Istanbul, became highly unstable due to currency volatility. For those who held savings in lira, there was little respite, as inflation eroded the value of their money.

Governmental Responses: Unconventional Approaches

In response to the currency crisis, the Turkish government, led by President Recep Tayyip Erdoğan, adopted an unusual approach. Erdoğan repeatedly emphasized his opposition to raising interest rates, a move typically used by central banks to control inflation. Instead, the government sought to keep interest rates low to encourage borrowing and investment.

Critics, however, pointed out that this approach only accelerated inflation and drove further depreciation of the lira. By refusing to raise interest rates, Turkey faced a growing economic imbalance. Many international economists and financial experts recommended a shift in policy, but the Turkish government largely maintained its stance.

The Role of Foreign Relations and Geopolitical Tensions

Turkey’s geopolitical position also played a role in the lira’s performance in 2020. Strained relations with key allies, including the United States and European Union, contributed to economic uncertainty. Sanctions, tariffs, and diplomatic disputes all had a direct impact on investor confidence, further weakening the currency.

The lira’s struggle was not simply a domestic issue—it was deeply intertwined with global politics. As Turkey’s economy continued to suffer, foreign investors pulled out, exacerbating the situation. The country’s growing reliance on foreign loans, particularly those denominated in foreign currencies, made the situation even more precarious.

Turkey’s Fight Against Inflation

The Turkish Central Bank tried to maintain control by frequently intervening in currency markets. However, its reserves of foreign currency were rapidly depleted, leaving the bank with fewer options. Inflation, which had been a persistent issue for Turkey throughout the 2010s, rose significantly in 2020, peaking at over 12%.

This placed enormous pressure on consumers, who faced rising costs for basic necessities such as food, housing, and transportation. As the price of imports surged due to the weakened lira, the government found itself in a difficult position: either let inflation rise or raise interest rates—neither of which were palatable options.

Looking Ahead: The Future of the Turkish Lira

The economic forecast for Turkey in 2020 and beyond was filled with uncertainty. While some economists suggested that the lira’s depreciation might help Turkey’s export economy by making Turkish goods cheaper on the global market, this benefit was overshadowed by the long-term risks of uncontrolled inflation and currency devaluation.

The Turkish economy’s resilience has been tested before, but 2020 marked one of its most challenging periods in modern history. The question remains: can the lira recover, or will it continue to be a symbol of economic volatility in the years to come?

For those looking to invest in Turkey, the risks and rewards are stark. On one hand, the lira’s low value makes assets cheaper for foreign investors. On the other hand, the country’s political and economic uncertainty makes it a risky bet. Only time will tell if Turkey’s unique approach to economic management will pay off—or if the lira will continue to slide.